CaseStudy:AuditsofEmploymentPractices

Welch was hired by a telecommunications company to perform a preliminary pay analysis in anticipation of an impending OFCCP desk audit. The client provided the (12-factor) data often requested by the OFCCP at this stage of their investigation.

We made our initial comparisons and noted that none of the female/male or minority/white pay differences were statistically significant. The female/male pay differential, 3.2%, favoring men, was marginally insignificant at 1.95 standard deviations. Differences of less than two standard deviations are typically not considered significant.

Although not problematic, the client felt uncomfortable with this marginally insignificant result and asked us to investigate further. We examined female/male pay differences within each job and found that 96% of the overall pay disparity was attributable to the difference within a single job. The employer reviewed the data for employees within the job and recalled that there as a restructuring a few years earlier. Employees previously in a job in Grade 54 were outsourced, but offered continued employment, if they desired, at a different job in the lower paying Grade 52. Their pay rates were frozen at a level above the maximum pay for the new grade. Once we took account of this fact and made comparisons among similarly situated employees, the overall pay difference between women and men was reduced to 0.13% (favoring women) and 0.10 standard deviations, well below the two standard deviation benchmark used to determine statistical significance.

We have found that this technique, one of our diagnostic tools used to investigate and understand the data as well as validate our pay comparisons, often highlights forgotten details or imperfect data that impact and perhaps undermine the preliminary pay comparisons.